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UMich Consumer Sentiment Highest Since 2004 Despite Tumbling Inflation Expectations

Dear Janet (and whoever follows her) - look at the chart below and explain why pushing up inflation expectations is good again?

The final October prints for UMich confidence are in and confirm expectations with the headline sentiment topping 100 for the first time since 2004. However, inflation expectations slumped once again... anti-correlating with the hopeful exuberance.

 

As UMich explains, personal finances were judged near all-time record favorable levels due to gains in household incomes as well as decade highs in home and stock values. Lingering doubts about the near term strength of the national economy were dispelled as more than half of all respondents expected good times during the year ahead and anticipated the expansion to continue uninterrupted over the next five years.

The year-ahead inflation rate was expected to be 2.4% in October, down from 2.7% last month (due to hurricane induced gas prices), and equal to last year’s reading. The expected year-ahead inflation rate was significantly higher among households with incomes in the bottom third (2.8%) than either the middle (2.1%) or top third (2.2%).

Households with incomes in the top third voiced less positive views toward durables and vehicle purchases, and remained unchanged for home purchases. The October results advise some caution since households with income in the top third account for half of all consumption expenditures, but even though slightly diminished, they are still quite favorable.

Overall, the data indicate a 2.6% growth rate in real consumption in 2017 and in the first half of 2018.